Price drops dampen harvest optimism
06:00 28 July 2014
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Falling commodity prices have put a dampener on high hopes for this year’s harvest in East Anglia.
While the picture is mixed and some crop yields haven’t fulfilled all of their early promise, farmers are pinning their hopes on a good wheat harvest.
Many will start to bring the crop in over the next days and weeks knowing that higher input prices and lower crop prices will squeeze their margins.
Farmer John Collen, of Gisleham, near Lowestoft, estimated that it cost about £140 to produce a tonne of wheat in today’s terms, against a backdrop of its current market value of about £120. Farm subsidies offset that by about £20 a tonne, bringing the crop to break-even point. He is looking for a higher than average yield, or about 4 tonnes an acre to enable him to achieve a healthy margin.
But as farmers have the option to keep the crop until the price gets better, it’s possible he’ll get a better return by ‘playing the market’.
“It’s a very open and transparent market. It’s very fluid, and it goes up as well as down. Basically, we now have 12 months to trade the crop we harvest. So if we are lucky we might be able to trade ourselves into a higher price,” he said.
Factors such as the southern hemisphere harvest, six months behind the northern hemisphere one, would affect where the price goes and remains the big unknown, he said.
The revival of fortunes in the general economy could mark the end of a good spell for farmers in which crop prices have stayed high, he predicted.
“Unfortunately farmers do well in a recession and not so well when the rest of the economy is doing well,” he said. “Having had five or six years where profits have been reasonable, we are in an industry which has taken the good with the bad,” he said. “This will be one of the thinner years.”
While he was hopeful for his wheat crop, which was looking “very well”, it would be impossible to give an accurate prediction of yields until the harvest , which he will start within the next week or so, is in. His oilseed rape crop had performed to expectations, he said, although prices were down from about £350 to £375 a tonne last year to about £250 a tonne this year.
Meanwhile, Bill Baker, of Drinkstone, near Bury St Edmunds, said his oilseed rape crop yield had been good at about four and a quarter tonnes per acre, but not as good as he had hoped. “I thought it would be a record-breaking year, but it wasn’t,” he admitted.
His wheat crop, still out in the field, looked “full of promise”, he said.
However, there had been a “fair drop” in the price, and there was no guarantee it wouldn’t keep dropping, he said.
With blackgrass issues and disease to stave off such as septoria, a fungal disease, input costs were an issue, he said.
“We seem to be throwing more and more at these crops so when there is a tightening of the margins it gets painful,” he said.
But he felt optimistic on the yields front.
“It’s always good to fill the barns up and know you have got a good yield and you have done the best you possibly can. Of course, as a businessman, it’s all about the bottom line as well. We’ll hopefully be rewarded with a good yield and a barn full of commodities to sell.”